Yammer Lands $85 Million Funding Round From Draper Fisher Jurvetson

The rumors are true. But, boy, were they ever off on the numbers. Social enterprise software player Yammer has landed a whopping $85 million in a fifth round of venture capital funding led by Draper Fisher Jurvetson, with Meritech Capital Partners, Jeff Skoll’s Capricorn Investment Group and Khosla Ventures all getting in on the action. The round brings Yammer’s total capital raised to date to $142 million. DFJ managing director Randy Glein will take an observer’s seat on Yammer’s board.

Published reports on Pando Daily had previously suggested that the company was close to landing a round in the $50 million neighborhood, with the implied valuation between $500 million and $1 billion, a range so large you could drive a tank through it. Yammer won’t say one way or another, but it’s pretty safe to say the higher number is the more accurate one.

Prior investors Charles River Ventures, Emergence Capital, Founders Fund, the Social+Capital Partnership and US Venture Partners are all participating again, as are angel investors Bill Lee, Max Levchin and football great Ronnie Lott.

Clearly, the intent here is to raise Yammer’s visibility game a bit, in the face of more visible players in the social enterprise software space — like Jive, which IPO’d late last year, and Chatter, which Salesforce.com CEO Marc Benioff can’t seem to stop telling people will save the world. Social enterprise software is becoming an increasingly popular and thus competitive business. Jive’s IPO gives it some visibility that doesn’t hurt when it goes to win business from new customers. Chatter tends to be less of a rival, though its strength is in places where Salesforce.com is already well-entrenched, which is the sales department.

One thing that’s going to happen is that Yammer will kick off a large advertising campaign, using print and online ads that aim to tell the world about how enterprise social networks are making companies more efficient in their collaboration.

The other thing is that the drumbeat about a Yammer IPO will start to get louder as the year goes on, though if you ask CEO David Sacks about it, as I have on more than a few occasions, he says very little, and you might be tempted to consider this massive round a case of Jive envy.

Lots of people got very rich on that IPO, and there’s absolutely no reason the same thing couldn’t happen with Yammer: Having launched some years back as a “Twitter for business,” it has evolved into more of a Facebook-like service for getting things done across a company.

Yammer has more than four million corporate users, including employees at more than 85 percent of the Fortune 500. Most of those are simply people inside a company, who signed up for Yammer and may or may not be using it on regular basis. The company has said in the past that it has a 20 percent conversion rate, which works out to about 800,000 paid seats. Part of the advertising campaign may involve trying to kick the conversion rate up a few notches.

Also? Yammer signaled in its press release that it plans on making some strategic acquisitions. This could go two ways. First, Yammer could try and roll up some smaller, lesser-known players in the business and take their customers. Or it could be eyeing some interesting “acqhire” cases, where there are some smart people running early-stage companies that could add some capabilities to Yammer’s. We saw Jive do precisely this, when it acquired OffiSync in May.

The funding comes less than a week after Yammer said it had integrated SAP into its activity streams, making it the first among the social enterprise companies to do so. Sacks has described Yammer as something of a “Switzerland of collaboration,” and has added the ability of something like 15 different enterprise software applications to talk to Yammer, some of them more important than others. That may be so, but given how hot the social enterprise business is getting by the day, it’s starting to look a lot more like the hypercompetitive Coke and Pepsi.

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